It’s long been said that if there was an industry ripe for disruption, it’s financial services. Awhile back, fintech got that ball rolling and there’s much more innovation to come on that front. More recently, artificial intelligence (AI) has made inroads in financial services.
Registered investment advisors are taking note because many advisors are worried about the negative disruption potential of AI on their business models. Owing to advancements in generative AI, there’s widespread speculation that this technology will eventually usurp some high-paying white collar jobs. Add that to the increased intersection of technology and investing and it’s not surprising that some registered investment advisors are fretting that computers and robots will eventually steal their jobs.
Indeed, there are elements of a “the robots are coming” moment in the advisory/wealth management space, but much of that is hyperbole. If nothing else, the twofold good news for advisors today is that AI is not advanced enough to be trusted to make sound investment decisions and an overwhelming number of polls and studies confirm that clients want a human touch.
Still, AI can be advantageous for adivsors and their practices. It’s a matter of knowing how to deploy this still evolving technology.
Keep Expectations Tame
While there’s much to be excited about regarding generative AI and its potentially positive effects on the advisory business, advisors should also keep expectations in check. For now, it’s unlikely AI will be a major driver of a practice’s top-line growth, but it can be used to boost efficiencies.
“So opportunities are seen across the value chain in sales and client service, product development, investment in research and middle and back office. Initial efficiency use cases would include drafting customized pitch or RFP reports and sales, synthesis of research and extraction of data in research, and coding in I.T.,” notes Morgan Stanley’s Bruce Hamilton.
Morgan Stanley acknowledges that generative AI can have some benefits to portfolio managers that are looking to free themselves of mundane tasks to better focus on securities selection. However, the bank adds that advisors stand to benefit more from AI evolution.
“Financial advisors stand to benefit the most from Gen A.I because it should help liberate advisors time spent on routine or administrative tasks and allow them to focus more of their time on building deeper connections with clients and allowing them to service more clients with the same resources,” observes Morgan Stanley’s Mike Cyprys. “And so that's how you get the revenue opportunity, by serving more clients and more assets. It's more of a copilot or tool that enhances human capabilities as opposed to replacing the human advisor.”
Expect Efficiencies
For advisors, the thing to keep in mind is that there may well come a day when AI is accretive to a practice’s top-line. That day isn’t today.
Still, it’s hard to ignore the allure of increased efficiencies. Realizing that advantage can free up advisors to better connect with existing clients and bring new clients on board.
“It's really an expense efficiency play in the near to medium term for asset managers. But as you look out over the next 3-to-5 years, we could see a situation where A.I is embedded in a broader range of activities,” concludes Cyprys.
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